The founders of the LBO industry – KKR, Blackstone, Apollo, TPG, and Bain Capital – are stuck in giant deals that have turned into debt zombies. The outbreak of mega-LBO mania during 2006–2007 reflected a financial market deformation that sowed recklessness across the entire private equity space. And the debt zombies are still out there.
Wall Street shenanigans
Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
by Wolf Richter • • Comments Off on Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
The bond-fund massacre is spectacular. Antsy investors yanked $7.7 billion in August out of the world’s largest bond fund, Pimco’s Total Return Fund. In July, they’d yanked out $7.5 billion, in June $14.5 billion. From May 1 through August 31, the fund’s assets shriveled 14%. Other bond funds got hit too. And September is shaping up to be even worse.
Deluded Optimism in Corporate Earnings Growth (Now Shriveling)
by Wolf Richter • • Comments Off on Deluded Optimism in Corporate Earnings Growth (Now Shriveling)
These wildly optimistic estimates of earnings growth that analysts work on so studiously by copying and pasting what companies tell them, or by doing channel checks and poking around the industry, and that companies have to exceed at all costs “on an adjusted basis?” Well, they have been shrinking for 2013 – but only after reality forced them down.
David Stockman: How The Fed Helped Bushwhack TXU
by David Stockman • • Comments Off on David Stockman: How The Fed Helped Bushwhack TXU
When “QE Infinity” Turns Into A Pipedream: Hot Money Evaporates, Rout Follows – See Emerging Markets
by Wolf Richter • • Comments Off on When “QE Infinity” Turns Into A Pipedream: Hot Money Evaporates, Rout Follows – See Emerging Markets
Printing money and forcing interest rates to near zero, that’s how the Fed and other central banks papered over the Financial Crisis, duct-taped the bursting credit bubble back together, inflated new asset bubbles, and propped up TBTF banks. It accomplished a huge feat: a worldwide tsunami of hot money. Which is now receding.
David Stockman: The Texas Gas Bubble Massacre
by David Stockman • • Comments Off on David Stockman: The Texas Gas Bubble Massacre
The $47 billion buyout of TXU was a bet on a truly aberrational price gap between coal and natural gas that couldn’t possibly last, writes David Stockman. “So the largest LBO in history was the ultimate folly of bubble finance.” It generated $1 billion in fees and an “epic $32 billion payday” for shareholders, “including the hedge funds that had front-run the deal.”
Fed: We Can Avoid A Crash At The End Of QE If Everybody Believes That Everybody Believes In A Mirage….
by Wolf Richter • • Comments Off on Fed: We Can Avoid A Crash At The End Of QE If Everybody Believes That Everybody Believes In A Mirage….
What rabble-rousers, economists (those banished from the mainstream media), and bloggers have hammered on for years, a study by the San Francisco Fed finally confesses: Quantitative Easing didn’t do a heck of a lot of good for the real economy. The timing of the study is impeccable: the nearing end of QE – and the market mayhem it might cause.
David Stockman: Hedge Funds, Haven Of Hit-And-Run Capital For The 1 Percent
by David Stockman • • Comments Off on David Stockman: Hedge Funds, Haven Of Hit-And-Run Capital For The 1 Percent
During the 14 years since the LTCM crisis, the Fed’s interest rate repression policies have resulted in an inflation-adjusted return on six-month CDs of exactly 0%, David Stockman writes. It revolutionized the saving and investment habits of the wealthiest households. Unlike hapless savers among the middle class, the rich had an escape route.
Trouble In Junk Bond Lala-Land
by Wolf Richter • • Comments Off on Trouble In Junk Bond Lala-Land
Private Equity firms have seen this coming for months. They’re positioning themselves for it. In April, Leon Black, CEO of Apollo Global Management, explained it this way to an incredulous world: “We’re selling everything that’s not nailed down.” Now they’re setting records – but someone will end up holding the bag.